Blog Bites – What is a 401k?

Today we have two questions for you.

Number one, do you know what a 401k is? And second, are you taking full advantage of the one your company offers you?

Since we at A Step Above Style value your time (and because you already know why you’re here) we’ll jump right in.

Let’s begin.

What is a 401k?

A 401k is a employer – sponsored retirement plan that is offered to its employees.

This retirement savings account grows in size due to periodic employee contributions that come directly out of their paycheck.

Did You Know?

• Some employers match what a employee contributes to their 401K up to a certain amount (ask the HR Department at your job about this)

• Most companies have a “Vesting” period when it comes to company matching. All this means is you have to stay at the company for a certain length of time before the money the employer contributes is completely yours.
• If you leave one company and go to another, often times you can roll over your 401K into the new company’s retirement savings account.
• Early withdrawal (withdrawal before age 59 1/2)from a 401K will result in certain taxes and fees.
• It is a somewhat common practice for people to request a hardship withdrawal for emergency medical expenses, purchasing a home, preventing eviction from your home, and covering the cost of a funeral.

A key take away here is to become familiar with the people who work at your job’s HR Department. Take time to read through the information they give you concerning the topic of retirement accounts.

This is not official financial advice as we at A Step Above Style are not financial advisors.

But it is highly recommended to contribute whatever the employer is willing to match.

If they match up to 4% for example, then that’s what you should automatically contribute per pay period. If you don’t do this, you are leaving “free” money on the table.

We don’t recommend contributing more than what a employer will match. The key is to find employers who match higher percentages, and then stay employed there!

Conclusion

We at A Step Above Style hope you found this blog post entertaining, educational, and empowering.

Being financially literate is a important part of life for those who don’t want to be average.

And remember,

Until next time, y’all have a good one.

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Posted By: Jeffrey Chark · In: Smart Money